Friday, May 03, 2013

After a seven-day jury trial, the jury rejected B&B’s
claims of trademark infringement and unfair competition and found in favor of
Hargis’s counterclaims for false advertising and false designation of origin;
the district court awarded attorney’s fees to Hargis.B&B appealed, arguing that the district
court should have given preclusive effect to the TTAB’s findings about likely
confusion between the parties’ marks. The majority rejected that argument (though it
did remand for recalculation of fees).

B&B makes a fastener under the mark Sealtight, used
mostly in the aerospace industry.Hargis
makes screws commonly used in metal buildings under the Sealtite mark.They’ve been litigating for over 15
years.In 2007, the TTAB refused
registration to Hargis’s Sealtite on the basis of a 2(d) likely confusion
finding.B&B argued that this should
have preclusive effect.The district
court held that, because the TTAB isn’t an Article III court, no preclusion was
required, and further excluded evidence of the TTAB ruling as confusing to the
jury.

In the past, the circuit had held that a likelihood of
confusion determination in a cancellation proceeding by the old Court of Customs
and Patent Appeals collaterally estopped relitigation of that question in a
subsequent infringement action between the same parties.But the TTAB isn’t an Article III court as
the CCPA was.(In a footnote, the court
noted criticism of the earlier decision for failing to distinguish between
registration standards and infringement standards.)

The question to be decided was the weight to be given TTAB
decisions: preclusive effects as to adjudicated facts; some weight; significant
weight?“[C]ollateral estoppel may be
appropriate where administrative agencies are acting in a judicial capacity.”However, preclusion wasn’t appropriate here
because the TTAB simply didn’t decide the same likely confusion issues as were
before the district court.As the Second
Circuit, following McCarthy, has held, though the issues before the TTAB may
bear the same label, they’re not identical for preclusion purposes if the
standards governing them are significantly different—and that may happen for
the issue of likely confusion in a registration/cancellation proceeding
compared to an infringement case.Among
other things, the TTAB used only 6 factors in making its determination, which
weren’t identical to the 8th Circuit’s multifactor test.

The TTAB found that the similarities in the marks and their
use on fasteners supported a confusion finding, but also determined that the
specific fasteners were significantly different products marketed to different
industries and customers.It determined
that, for registration purposes, the former considerations trumped the market
usage.But for collateral estoppel to
apply, the TTAB must have examined the “entire marketplace context” as in a
trademark infringement action.By
placing greater emphasis on the mark similarity, the TTAB ignored the “critical
determination” of marketplace usage, which could be appropriate for
registration but was inappropriate for infringement.

Furthermore, a party’s failure to carry the burden of
persuasion on an issue shouldn’t have preclusive effect when an adversary would
later have the burden of persuasion on that issue.So the fact that Hargis couldn’t overcome
B&B’s challenge to the registration didn’t mean that B&B could meet its
burden of persuasion on infringement.The court again noted the evidence of marketplace differences.

B&B argued that the TTAB’s decision was entitled to
deference, but that’s when there’s a challenge to a registration decision,
which this was not.Nor did the district
court abuse its discretion in refusing to admit the TTAB decision into evidence
because it determined that admission “would be highly confusing and misleading
to the jury,” given that the jury and the TTAB weren’t supposed to use the same
factors to analyze infringement in the same way.The majority agreed and noted that the jury
was presented with factual evidence relating to the confusion factors; much of
that evidence was also presented to the TTAB, and the probative value of the
TTAB’s ultimate conclusion was minimal.

The court of appeals also found no abuse of discretion in
the award of attorney’s fees.The
district court found that the case was exceptional because B&B “went to
great lengths to manufacture evidence in support of its claim, such as creating
a false website developed with images from Hargis's website, contacting
long-time Hargis customers to create confusion with those customers, and making
misrepresentations at trial and in B&B owner Larry Bogatz's deposition
testimony.”This showed that the infringement
claim was groundless and unreasonable.However, because B&B’s prior appeal resulted in a ruling in its
favor, that appeal wasn’t groundless and unreasonable, so fees from that appeal
had to be deducted.

Judge Colloton dissented, concluding that the TTAB
previously decided the likely confusion issue. The TTAB concluded that the most
critical factors were the similarities of the marks and the goods: the marks
are substantially identical and they’re used on closely related products. The TTAB accepted anecdotal evidence of actual
confusion.

According to the Supreme Court, “giving preclusive effect to
administrative factfinding serves the value underlying general principles of
collateral estoppel: enforcing repose.” Therefore, “[w]hen an administrative
agency is acting in a judicial capacity and resolves disputed issues of fact
properly before it which the parties have had an adequate opportunity to
litigate, the courts have not hesitated to apply res judicata to enforce
repose.” McCarthy says that courts too readily deny preclusive status to TTAB
findings.Though it’s deciding
registration, “[i]f in the course of doing so factual issues are decided there
is no policy reason why those factual questions should not be foreclosed from
further re-litigation in court as long as the issues in the two cases are
indeed identical and the other rules of collateral estoppel are carefully
observed.”

The majority determined that the issues weren’t the same,
but just because the TTAB articulates a different multifactor test than the 8th
Circuit doesn’t mean that the issues were different.“Modest differences in analytical approach to
the same ultimate issue … do not justify dispensing with collateral estoppel,
just as variations in analysis among the circuits about a legal issue does not
mean that one circuit's decision lacks preclusive effect in another.”If the TTAB weighed the factors differently
than they should be weighed in an infringement case, then a TTAB finding will never be preclusive in an infringement
action.But the TTAB compared the marks
in their “entire marketplace context,” “discussing the companies' goods in
relation to the fastener industry, the companies' channels of distribution, and
the behavior of consumers in the market for the companies' products.”Given that contextual decision, the factual
basis for the confusion finding was the same and collateral estoppel was
appropriate.Mere disagreement with the
TTAB wasn’t a reason to deny its decision preclusive effect.

The majority also suggested that Hargis bore the burden of
persuasion in a registration action, while B&B had the burden as
plaintiff.But that only matters when
the difference in burden affects who should win, and the TTAB’s decision here
showed that the burden wasn’t material, saying, “[t]o the extent that any
doubts might exist as to the correctness of our likelihood of confusion
analysis, especially considering the prior determination that opposer's mark is
merely descriptive and has not acquired secondary meaning, we resolve such
doubts against applicant.”But that was
after a finding of likely confusion; this last sentence was “an alternative
holding based on an uncertain contingency.”The dissent would have vacated the judgment and remanded for further
proceedings based on the preclusive effect of the TTAB’s decision.

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